UK and International Tax news
FATCA Update
Sunday 16th September 2012
The UK Treasury has recently signed an agreement with the US to improve international tax compliance and implement FATCA. This is the first agreement of its kind which, according to the Treasury, will benefit UK financial institutions by addressing their legal concerns with complying with FATCA and reducing the burdens imposed on them. It also boosts HMRC’s ability to obtain information from the US to help in tackling UK tax evasion.
The UK-US agreement follows the Joint Statement made in July 2012 by the governments of France, Germany, Italy, Spain, the UK and the US, announcing the publication of the Model Intergovernmental Agreement to Improve Tax Compliance and to Implement FATCA [see our International News item of 8 August 2012].
The signing of the agreement follows the conclusion of negotiations on the UK-specific Annex II. This sets out UK institutions and products which are seen as presenting a low risk of being used to evade US tax and are therefore effectively exempt from FATCA requirements.
The UK-US agreement is closely based on the Model Agreement, and addresses legal barriers to financial institutions complying with FATCA, ensures that withholding tax will not be imposed on income received by UK financial institutions or on payments they make, ensures that the burdens imposed on financial institutions are proportionate to the goal of combating tax evasion, and establishes a reciprocal approach to FATCA implementation.
The agreement has been laid before the Houses of Parliament and will undergo a 21 sitting day scrutiny period as part of the ratification process. Financial institutions and other interested parties will now be consulted on the implementation of the Agreement in the UK and draft legislation will be published later in 2012.
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